OUT OF ACES...Swatch launches . NCF-enabled watch. Swiss watch giant Swatch Group has launched . the second generation of its chip-embedded watches for mobile payments in China. The

NEWS ANALYSIS INSIGHTPayPal expands its reach with TIO, and extends its European collaboration

The deadline for SCT Inst is approaching. Which countries are ready?

The Global Payments Innovation Jury’s John

Chaplin talks Asia

OUT OF ACES

WILL PSD2 SPELL THE END FOR PAYMENT CARDS?

Issue 361 / July 2017w w w. e l e c t r o n i c p ay m e n t s i n t e r n at i o n a l . c o m

EPI July 361.indd 1 03/08/2017 12:30:42

2 | July 2017 | Electronic Payments International

contents

NEWS

05 / EDITOR’S LETTER06 / DIGEST• PayPal expands into multi-channel bill

payments through TIO acquisition

• Visa, PayPal extend collaboration

• Swatch launches NCF-enabled watch

• Form3 secures strategic investment

• Mastercard to boost fraud-detection capabilities with Brighterion

• Swissquote launches virtual currency trading

• EMVCo announces first version of QR code specification

• CMA clears merger of UK payment schemes

• SMBC, Japan Post Bank join SBI Ripple Asia’s bank consortium

10

this month

Editor: Anna Milne+44 (0)20 7406 6701

[email protected]

Group Editor: Douglas Blakey+44 (0)20 7406 6523

[email protected]

Senior Reporter: Patrick Brusnahan

+44 (0)20 7406 [email protected]

Group Editorial Director: Ana Gyorkos


Sub-editor: Nick Midgley+44 (0)161 359 5829

[email protected]

Director of Events: Ray Giddings+44 (0)20 3096 2585

[email protected]

Head of Subscriptions: Alex Aubrey


Sales Executive: Jamie Baker +44 203 096 2622

[email protected]

Financial News Publishing, 2012. Registered in the UK No 6931627. ISSN 0956-5558Unauthorised photocopying is illegal. The contents of this publication, either in whole or part, may not be reproduced, stored in a data retrieval system or transmitted by any form or means, electronic, mechanical,

photocopying, recording or otherwise, without the prior permission of the publishers.

For more information on Verdict, visit our website at www.verdict.co.uk.As a subscriber you are automatically entitled to online access to Electronic Payments International.

For more information, please telephone +44 (0)20 7406 6536 or email [email protected].

London Office: 71-73 Carter Lane, London, EC4V 5EQ

Asia Office: 1 Finlayson Green, #09-01, Singapore 049246 Tel: +65 6383 4688, Fax: +65 6383 5433 Email: [email protected]

Customer Services: +44 (0)20 3096 2603 or +44 (0)20 3096 2636, [email protected]

IS THE DEATH OF CARDS ON THE CARDS?

COVER STORY

follow EPI on twitter@Payments_News

06

EPI July 361.indd 2 03/08/2017 12:31:00

www.electronicpaymentsinternational.com | 3

contents

July 2017

FEATURE

10 / DEATH OF CARDS?A major payment industry shakeup is afoot in the next year, as the second EU Payment Services Directive comes into force at the beginning of 2018. One of the burning questions, and one we have heard a great deal about from both ends of the argument, is what will be the impact on the card payment industry? Anna Milne writes

s to talk about cracking China, disrupting SWIFT, and leveraging WeChaCOUNTRY SNAPSHOTS

18 / SLOVAKIACash remains the predominant payment instrument in Slovakia, and is used mainly for day-to-day and low-value transactions. However, cards and contactless payments are gaining acceptance

19 / ROMANIACash accounted for 89.3% of the total transaction volume in 2016; attractive overdraft facilities also hamper consumer uptake of pay later cards. So, how are card issuers overcoming these obstacles?

20 / CHINAChina is Asia’s largest payment cards market in terms of card transaction value and volume, accounting for 77.1% and 45.8% shares respectively in 2016. What comes next for the regional giant?

s to talk about cracking China, disrupting SWIFT, and leveraging WeChaINDUSTRY INSIGHT

09 / PSD2There is a lot of hot air circulating over PSD2, and rightly so. The impending regulation marks a change in the payments and banking sector to a degree not seen for a long time. Anna Milne speaks to CGI’s Jerry Norton to assess some of the impacts

17 / APPLEWith Apple set to enter the P2P payments market, it faces strong competition from the current dominant player in the US, Venmo. Apple’s best bet is to leverage its huge customer base according to the GlobalData Financial Services payment analytics unit

21 / GLOBAL PAYMENTS INNOVATION JURYThe rate of development in the payment industry has rarely – if ever – been faster, and no region has its foot as hard on the accelerator as Asia. John Chaplin, chair of the Global Payments Innovation Jury, analyses the results of its latest research into the sector

PAYMENTS FINTRACKER

14 / WORLDPAYWorldpay has launched an extended trial of a software-only card payment mPOS system. My Business Mobile is designed to turn any smartphone into a card terminal without the hardware required by other mPOS solutions

15 / APPLEApple’s P2P payments service will enable users to transfer money through iMessages, or tell Siri to pay people using credit and debit cards stored in the Apple Pay wallet. Will Apple Pay Cash fly?

16 / PI PAYWith around 75% of its population aged under 40, Cambodia is rapidly embracing smartphone and internet connectivity. Soon-to-be-launched mobile payment service Pi Pay is set capitalize on this

21

ANALYSIS

13 / SCT INSTThe deadline for the start of the new Single Euro Payments Area Instant Credit Scheme (SCT Inst) is fast approaching, and the countries involved are at various levels of preparedness, writes Anna Milne

20

EPI July 361.indd 3 03/08/2017 12:31:05

Intelligent Environments is an international provider of innovative mobile and online solutions for fi nancial services providers. Our mission is to enable our clients to deliver a simple, secure and effortless digital experience to their own customers.

We do this through Interact®, our single software platform, which enables secure customer acquisition, engagement, transactions and servicing across any mobile and online channel and device. Today these are predominantly focused on smartphones, PCs and tablets. However Interact® will support other devices, if and when they become mainstream.

We provide a more viable option to internally developed technology, enabling our clients with a fast route to market whilst providing the expertise to manage the complexity of multiple channels, devices and operating systems. Interact® is a continuously evolving technology that ensures our clients keep pace with the fast moving digital landscape.

We are immensely proud of our achievements, in relation to our innovation, our thought leadership, our industrywide recognition, our demonstrable product differentiation, the diversity of our client base, and the calibre of our partners.

For many years we have been the digital heart of a diverse range of fi nancial services providers including Atom Bank, Generali Wealth Management, HRG, Ikano Retail Finance, Lloyds Banking Group, MotoNovo Finance, Think Money Group and Toyota Financial Services.

To fi nd out more please visit:

www.intelligentenvironments.com

Simple, secure and effortless digital solutions for fi nancial services organisations

@IntelEnviro

IE Adverts - 2017.indd 1IE Adverts - 2017.indd 1 21/12/2016 11:53:1221/12/2016 11:53:12


editor’s letter

A demise greatlyexaggerated

Get in touch with the editor at: [email protected]

Anna Milne, Editor

In this issue we look at what effect PSD2 and SEPA Instant Credit Transfer (SCT Inst) will have on the card payment business.

The different arguments have been bandied around for a while by various payments bods, so we have tapped some of the more pertinent voices in the fray for their views.

Generally speaking, card payments in highly banked markets – having been well established there for years – will be hard to replace.

Nor is there much sense of urgency around the replacement thereof. It will require a system that meets the same global reach, the same standards and interbank relationships, the same sense of trust and familiarity for both merchants and consumers, the same ubiquity.

The argument that the combination of PSD2, which will provide fertile ground for new payment services to exist, accessing customer account information from their banks, with that of SCT Inst will very quickly create a scenario whereby a customer will share account information at a till to pay the merchant directly from account, remains far-fetched for now. SEPA Instant Credit Transfer is primarily about moving money more easily cross-border, and is long overdue.

Even with all the hype about the rise of mobile payments, this rise has taken place primarily in emerging markets where

there has been a notable lack of banking services. Research by our analysis unit has shown a direct correlation between appetite for mobile payment services and a lack of a banking system. It seems to state the obvious.

The dialogue about customers being technologically astute or having an appetite for digitisation is secondary to the age-old economic model that is supply and demand. Currently, consumers are not pushed enough to drive a revolt against cards.

Players in the west have wanted to cash in on the success of mobile payment giants such as Alipay and WeChat, the temptation of taking even a tiny piece of that pie being too large to resist. However, it will never take off in the same way it has there, and at nowhere near the exponential pace. They had little competition, their timing was nigh-on perfect, and they developed the right solution.

Payment mechanism pathways will diverge for a lot longer than they will converge. In-app payments are likely the next type of payment to flourish, perhaps stealing some of e-commerce’s thunder, but these are and will all still be card-based payments.

As PSD2 comes into play, and SCT Inst in just a few months’ time, yes it will pave the way for change, but cards are not going anywhere any time soon. <

EPI July 361.indd 5 03/08/2017 12:31:06

Swatch launches NCF-enabled watch

Swiss watch giant Swatch Group has launched the second generation of its chip-embedded watches for mobile payments in China.

The new NCF-enabled watch, Swatch Pay, has been introduced with support from UnionPay and 11 Chinese banks.

The banks supporting Swatch Pay are Industrial and Commercial Bank of China, Bank of China, Postal Savings Bank of China, China CITIC Bank, Hua Xia Bank, China Minsheng Bank, China Merchants Bank, Industrial Bank, Shanghai Pudong Development Bank, Ping An Bank, and Bank of Xi’an.

Using China UnionPay’s cloud-based payments technology, the new watches can be linked with credit cards and debit cards.

After buying a Swatch Pay watch, customers will need to download an in-store app and complete a scan to activate it, with the tokenisation process taking “a few minutes”.

Users can then add card details from participating banks and make contactless purchases at shops that have POS terminals with China UnionPay QuickPass.

Swatch Group CEO Nick Hayek said: “Swatch has been a pioneer in contactless technology since 1993 with the introduction of Swatch Access. Now it’s logical to be a pioneer with regard to bank cards as well. We are very happy about launching Swatch Pay.”

The Swiss watchmaker said Swatch Pay will be available at selected Swatch stores in 28 Chinese cities from 27 July 2017. <

news digestPayPal expands into multi-channel bill payments through TIO acquisition

PayPal has concluded its acquisition of Canada-based bill payment business TIO Networks to accelerate its entry into the bill payment market.

The payment giant agreed to acquire all of the outstanding shares of TIO for $2.64 per share in cash, or an approximate $238m equity value, in February this year.

TIO, which processed more than $7bn in consumer bill payments in the 2016 fiscal year, will now operate as a separate service within PayPal.

The acquired multi-channel bill payment processor will be led by Hamed Shahbazi, vice-president of bill pay and general manager, PayPal Canada bill pay services.

“As complementary organizations, PayPal and TIO are well positioned to make paying a bill as fast and simple as making a payment with PayPal.

“Through this acquisition, PayPal will expand its global scale of operations, complement its product portfolio, and accelerate its entry into the bill pay market, enabling millions of customers to improve their financial health through access to TIO’s valuable services,” PayPal said.

PayPal president & CEO Dan Schulman said: “Expanding into multi-channel bill payments through the acquisition of TIO furthers this mission, and will meaningfully advance our ability to offer digital financial services to tens of millions of underserved customers.” <

Visa, PayPal extend collaboration to EuropeVisa and PayPal have extended their strategic partnership to Europe to speed up the adoption of secure online, in-app and in-store payments.

Both operators are already collaborating in the US and Asia-Pacific, and the latest move will extend the benefits of the partnership to European consumers and businesses.

PayPal, using its banking license in Europe, is joining the Visa network of client financial institutions and will be able to offer Visa accounts in Europe. The partnership will allow consumers and businesses to use PayPal funds to spend wherever Visa is accepted worldwide.

The partnership will pave the way for financial companies to enable Visa account holders to checkout anywhere PayPal is accepted online. It will also facilitate PayPal acceptance by European businesses that accept Visa in physical locations.

Visa’s CEO for Europe, Bill Sheedy, said: “Visa and PayPal have a shared goal of giving consumers a safe, convenient way to pay using their preferred device. Expanding our partnership into Europe provides greater consumer choice and benefits merchants.

“By having the option to issue Visa accounts in Europe, PayPal will now have the ability to offer customers new and innovative ways to manage and move their money, regardless of platform or device.”

PayPal Europe’s executive vice-president and CEO, Rupert Keeley, commented: “Our partnership will enable us to offer more choice to millions of consumers and businesses through an expanded range of innovative products.

“Whether it’s online, in-app or in-store, PayPal with Visa will offer simple, secure and convenient ways to pay and get paid,” Keeley added. <


News | Digest

EPI July 361.indd 6 03/08/2017 12:31:09

News | digest

Mastercard to boost fraud-detection capabilities with BrighterionMastercard has agreed to acquire Brighterion, a San Francisco-based software company specialising in artificial intelligence (AI), as part of its strategy to improve its fraud detection capabilities.

Mastercard believes the acquisition will expand its suite of capabilities that deliver an enhanced customer experience and security.

AI technology provides improved insights from every transaction to assist in making decisions about fraudulent activity.

On completion of the transaction, Brighterion’s Smart Agent technology will be integrated with Mastercard’s advanced suite of security products.

According to Mastercard, the ensuing insights and capabilities will provide even greater accuracy and a new element in managing risk and protecting the consumer.

Mastercard’s president of enterprise risk and security, Ajay Bhalla, said: “To fully realise the promise of our increasingly digital lives, we need to design our payment systems with the future in mind, and that’s what we’re doing.

“Our unprecedented use of artificial intelligence on our network is already proving successful. With the acquisition of Brighterion, we will further extend our capabilities to support the consumer experience.”

Brighterion founder and CEO Akli Adjaoute said: “It all comes down to intelligent decisioning at the time of the transaction. We’ve worked with Mastercard over the years to identify patterns and trends to power their most advanced customers’ authorisation and decisioning activities.

“We look forward to building on that foundation and providing an industry-leading, holistic and seamless security experience.”

The transaction is subject to customary closing conditions. <

Payments platform Form3 secures strategic investment from BarclaysForm3, a cloud-based platform for global payments processing, has raised $5m in a series-A funding round from Barclays Bank, Angel Co-Fund and several individual investors.

The UK-based business intends to use the funding to expand across Europe and North America.

The startup currently offers clients real-time and interbank payments processing through UK Faster Payments, BACS, Chaps, Sepa and SWIFT. However, it plans to launch SEPA real-time services from November 2017, and US real-time from early 2018.

Form3 added that it plans to considerably expand its team to support its growth within the challenger bank and fintech community.

Form3’s CEO, Michael Mueller, commented: “We see Form3 as the next generation of payments platform. Our clients quickly see the benefits of our cloud-native platform, often starting with a single payment type to improve their client proposition.

“There is no roll-out of complex projects with big teams and monolithic payment hubs, gateways, integrations etcetera. Clients simply subscribe to a payment service and we take care of the rest.

“A low-cost setup and pay-as-you-go commercial model for the first time, makes leading-edge payment capability accessible economically for small or very-high-volumes users.

“We are very excited about the support we have received in this funding round; it is a testament to our growing client base and our ability to meet the market needs for better access to payment systems,” Mueller added.

Dan Roberts, MD at Barclays, commented: “We see Form3 as an enabler for positive change in the payments landscape. Form3 has rapidly deployed services to be a significant challenger to current technology options.

“We view the emerging payments-as-a-service model as complementary to our existing capabilities, offering clients further choice. We look forward to working with Form3 as they build out their model.” <


Swissquote launches virtualcurrency tradingSwitzerland-based online bank Swissquote has launched Bitcoin trading on its platform, in a move that is being billed as a major step in virtual money’s integration into the traditional financial system.

Clients of the Swiss bank will now be able to exchange euros and US dollars into Bitcoin using their trading accounts, except without access to leverage. With the lack of leverage, there is no risk of losing more than the invested amount.

Clients can trade from five units of base currency to a minimum of €100,000 or $100,000. The trading fees vary between 0.5 and 1% of the transaction value,

depending on the total amount invested.Swissquote has collaborated with

Luxembourg-based cryptocurrency exchange Bitstamp to assist in the Bitcoin trading process.

Swissquote CEO Marc Burki said: “Many investors are interested in cryptocurrencies, but are afraid to trade them. The players in this market are mostly little known and require a transfer of funds to a foreign account.

“As a Swiss bank we offer our clients a simplified, transparent process, without foreign transfers, that is within reach of everybody.” <

EPI July 361.indd 7 03/08/2017 12:31:14

News | Digest

EMVCo announces first version of QR code payment specificationsEMVCo, a consortium for smart payments collectively owned by American Express, Visa, Mastercard and UnionPay, has issued the first version of quick response (QR) code specifications, as part of moves to develop an industry standard for the payment format.

The QR code format features random patterns of black-and-white images, and can hold 300 times more data than traditional bar codes.

The development comes a year after UnionPay’s proposal to EMVCo to set up a safe, interoperable and open QR code payment system in June 2016. Following that, EMVCo established a working group for developing the QR Code Specification and appointed UnionPay as group leader to manage the development of QR code payment solutions.

The QR code payment specification, which was issued by UnionPay to its members, is compatible with this EMVCo specification.

In a statement, EMVCo said: “In an EMV consumer-presented mode QR code transaction, consumers can make

purchases – using credentials associated with their EMV card and previously provisioned to their device – by selecting the QR option for payment within their mobile application, which will result in the display of the QR code, and having that QR code scanned at the time of payment to complete the transaction.

“These transactions are always authorised online and given that the scanning of the QR code is a one-way transfer of data from the consumer’s device to the POI, the payload of the QR code does not contain any data from the POI,” EMVCo continued.

“While out of scope of this specification, in the event that any cardholder verification is required, it is envisaged that it would be performed through CDCVM. Thus, unlike typical EMV transactions, the requirement for CVM is never communicated, or delegated to the POI.

“While specific markets may have POI CVM requirements in addition to any CDCVM that may have been performed, these POI CVM requirements are out of scope for EMVCo.” <

CMA clears merger of UK payment schemes

The UK Competition and Markets Authority (CMA) has approved the planned merger of Bacs Payment Schemes, Faster Payments Scheme, and Cheque & Credit Clearing Company, to form a new payments systems operator.

The consolidation aims to create a single, integrated retail payment system operator and increase competition in the payments and banking industry.

The move will streamline access to payment systems and deliver the New Payments Architecture being developed with the Payments Strategy Forum.

The Bank of England said: “The consolidation aims to further develop the capability and capacity of the operators by bringing them within a single organisation, and reduces the complexity and costs of having three separate retail payment system operators (PSOs).”

The Payment Systems Regulator (PSR) and the Bank of England have already agreed a delivery plan, with the merger of the three independent schemes expected to complete by the end of 2017.

The united entity will take forward the next stage of the development of the New Payments Architecture (NPA), an industry-led initiative that aims to boost competition in the payments and banking industry.

The Payment System Operator Delivery Group’s independent chair, Robert Stansbury, said: “We have made significant headway towards redefining the way in which the three PSOs will operate in the future.

“A single consolidated PSO would simplify access to, and the governance of, payment systems, helping to drive innovation and competition across the UK industry.

“But while good progress has been made, support from across the industry is vital and significant collaborative work still needs to be done if the plan is to be delivered successfully and the benefits of the consolidation unlocked.” <

SMBC, Japan Post Bank join SBI Ripple Asia’s bank consortium

Sumitomo Mitsui Banking Corporation (SMBC) and Japan Post Bank have joined SBI Ripple Asia to access its technology for payments and settlement.

Less than a year ago SBI Ripple Asia announced the establishment of a Japanese consortium of banks to help manage the “slow and costly pain points” associated

with sending payments using current rails.The consortium then grew to 47

banks that successfully concluded a pilot implementation of Ripple to offer real-time money transfers both domestically and globally, with the target of going live by the year end.

With the joining of SMBC and Japan Post Bank, the total number of members has reached 61, accounting for over 80% of total banking assets in Japan.

SMBC, MUFG and Mizuho have also joined the Japan bank consortium using Ripple for payments in Japan.

Ripple’s global head of strategic accounts, Marcus Treacher, said: “We commend these banks in Japan for taking a giant step forward on behalf of their customers.

“This is a great example of a regional banks converging into a global real-time payments network for the greater good.” <


EPI July 361.indd 8 03/08/2017 12:31:22


industry insight | psd2

PSD2, A Seismic Opportunity BUT: data managemenT stands to thwart innovative servicesThere is an awful lot of hot air circulating over PSD2, and rightly so. The impending regulation marks a change within the payments and banking sector to a degree not seen for a long time. Anna Milne speaks to CGI’s Jerry Norton to assess some of the impacts

Consulting is the most obvious and immediate area ripe for business in the run-up to the second Payment

Services Directive.How to implement a new business strategy,

deciding what strategy to implement in the first place, or gauging what the impact will be on a business as a result are all cash cow questions, from a consulting point of view. From security to regulation, there are myriad angles for a pitch.

CREATE A PORTALThe first piece of advice from Jerry Norton, head of financial services strategy at CGI, is to “create a portal.

“Whether that’s a portal for your internal customers or your external customers, you need a portal to advertise these APIs [application programming interfaces],” Norton explains.

“In the main, it is down to technology to facilitate these changes and implementations. The impact on a business could be about security, regulation or developing APIs – although, apparently, they are not too taxing.

“Then you need some tools to police it. By that, I mean security, volumes, how many people are calling me, monitoring the APIs that are coming in, all of that.

“You also might need some things like the registration and authentication of third parties, and there’s a big debate about how that all works,” Norton adds.

“Software could cover those four aspects.

You’ve either got to buy that software, or you’ve potentially got to build it. Some people might build it.

“You’ve certainly then got to operate that, and there are people talking about the concept of an API factory, so you employ us to build it. You can have an API factory using one of those tools.”

INITIATOR OR AGGREGATORA bank could be any of the following: the owner of the payment account, the account service provider or the third party which either initiates payments or becomes the aggregator.A common misconception is that an aggregation service simply lists all the activities of different accounts under the same name, with account-holder permission.

Norton describes this as a “very thin use case” and mentions Yodlee and Mindtree in the US who already provide such services.

As an example, Norton suggests energy company B2C, supplying energy to consumers, in PSD2 terms, being a trusted third party and initiating the payment for the energy itself.

However, while the advantage here for the energy company is obvious, there seems little incentive for customers to break away from direct debits.

More consumer-beneficial is the mortgage application scenario, which will enable banks to make a lending decision from viewing statements via an API, saving said consumer having to provide statements.

This can speed up the application process tenfold – or, as Norton puts it, to “seconds, rather than days and weeks” – and could be a genuine draw for a customer.

“I think that is what is behind PSD2. [The European Commission] is trying to achieve a market where there is innovation, where there is a combination of these things which will help the consumer, and which will help the small business.”

DATA MANAGEMENTGDPR requires explicit consent for an external party to be able to use a person’s data.

And a person can change their mind, so the business or bank needs to be set up to accommodate a data set to be removed entirely at the request of the consumer – and have a record of it.

It also means that the consumer can control exactly what data is shared. They might, for example, decide that a third party may only access one account, such as a current account, and not a savings account. So the institution or bank needs to flexible enough to share subsets of data as well.

“That is described as a data-management problem,” Norton notes. “It’s not insurmountable. You’ve got to have care and attention to detail, and to some banks, that is a problem.”

And there is the authentication of the third party. It is a pretty safe bet that certain challenges will arise in the overlap between PSD2 and GDPR. <

EPI July 361.indd 9 03/08/2017 12:31:24


Feature | Death of cards?

PSD2 and Instant Payments:

Is the death of cards on the cards?

A major payment industry shakeup is afoot in the next year, as the second EU Payment Services Directive comes into force at the start of 2018. One of the burning questions, and one we have heard a great deal about from both ends of the argument,

is what will be the impact on the card payment industry? Anna Milne writes

EPI July 361.indd 10 03/08/2017 12:31:25



The combination of PSD2 and SEPA Instant Credit Transfer (SCT Inst), which actually comes into play during the final quarter of 2017, is a recipe which could cut out a great

portion of the card payment industry.According to the European Commission, PSD2’s main aims are to:

• Contribute to a more integrated and efficient European payments market

• Level the playing field for payment service providers (including new players)

• Make payments safer and more secure• Protect consumers• Encourage lower prices for payments

The European Commission is trying to achieve a market where there is innovation, where there is a combination of factors which will help the consumer and small businesses.

CARDS WON’T LOSE OUTSo, who are the main voices in the Cards Won’t Lose Out camp?

According to Pierre-Antoine Vacheron, CEO at Ingenico ePayments – a company that, it must be pointed out, has put massive investment into payments innovation and application programming interfaces (APIs) – the upcoming changes present no threat to the card payment industry.

“The death of cards is not on the cards amid PSD2 and Instant Payments,” Vacheron asserts confidently.

“Cards have such a strong value and are such an established payment method. Card payments make it simple for the merchant to accept payment from someone they do not know.

“The schemes are so well organised, no one is at risk at all. The card experience is almost perfect, almost transparent – for example Uber – painless payments,” Vacheron adds.

Vacheron also points out that the biggest priority for merchants is to increase conversions.

“There is a shift in the behaviour of merchants, which has been interesting in the last nine months.

“Merchants are feeling the pressure of Amazon – there is a changing paradigm. The only way for them to survive in the shadow of Amazon is to have an omni-channel solution, combining in-store presence with online presence,” he says.

Vacheron goes on to extol the virtues of regulation for creating “massive opportunity” for innovation.

Managing flows within marketplaces, an area for which Ingenico has been busy developing solutions, has been made possible because regulation has enabled banks to manage flows.

“In B2C retail payments, card payments are good; you get the certainty of funds, not debited immediately. Instant payments are a good fit for some use cases, but not all,” Vacheron stresses.

Sarah Francis, consultant at Polymath Consulting, is also sceptical as to the potential dent to card payments posed by PSD2 and Instant Payments. “Overall the concept that this will herald a decline in card payments is, I would say, simplistic,” she notes.

“The operational concepts of replacing cards with multiple bank relationships for all but the very largest retailers would seem challenging, and unlikely.

“It also assumes that all payments are domestic or EU-based, which may represent the majority for some, but it is unlikely to be 100%,” Francis explains.

“Will we see an evolution of payments for the schemes and others? Yes. Will this cause a sharp decline in the business done by Visa and Mastercard? Unlikely. How comfortable would you be handing over your bank details to a shop assistant at your local shop or cafe or restaurant?”

Francis believes the successful regulation, global reach and universal standards and rules of card schemes will not be easy to replicate. Of these, perhaps it is the global acceptance that may pose the biggest challenge: An Instant Payment global standard cannot be implemented overnight.

However, Tom Hay, head of payments at Icon Solutions, argues: “PSD2 and Instant Payments together offer a better and safer customer

experience than cards for online shopping.“The whole idea of a ‘plastic card’ is

irrelevant in the digital world.”

CARDS WILL LOSE OUTIngenico’s Vacheron used Uber as an example of an “almost perfect – almost transparent” painless card payment.

In stark contrast to Vacheron, Jerry Norton, head of financial services strategy at CGI, uses Uber in a counter-argument. He believes that under PSD2, Uber could become a Third-Party Payments Initiation Service Provider (PISP), which means it could initiate payments to itself.

Whether Uber would want to is a separate argument altogether, however.

Into this argument plays the updated General Data Protection Regulation (GDPR), which ascribes greater control to the consumer, translating into technical and security headaches for all those providing payment services.

The right to be forgotten is no easy feat to prove, digitally speaking, nor are ad hoc amendments to what data is stored or accessible, which will be subject purely to the consumer’s whim.

This may prove to be too much for a smaller player, to the extent that it may decide it not worth the hassle to go down the road of becoming a PISP.

RESEARCHOvum consulting, in conjunction with Icon Solutions, put out some research recently, revealing what it hails as “the only quantitative insights” into how PSD2 will act as a catalyst for the decline in card transactions.

no one is at risk at all. The card

experience is almost perfect,

almost transparent

EPI July 361.indd 11 03/08/2017 12:31:27



It makes sense, particularly in the online domain. It argues that the lower cost and increased convenience offered by Instant Payments will encourage retailers to accommodate these new payments.

It also argues that the merchant demand for these payment services and what it predicts as the decline in card payments will push banks to respond and implement this infrastructure.

It goes further to say that the banks stand to win from the overall shift, as long as they set themselves up in advance of the smaller market players. Presumably the banks would implement Icon’s Instant Payment infrastructure.

WHO STANDS TO LOSE?Nevertheless, it is not solely Ovum and Icon Solutions that are raising and answering this question: Norton holds a similar view. When asked whether any party stands to lose under PSD2, “cards” came the immediate answer.

“The threat is because it is coupled with SCT Inst. And banks that do not consciously make a decision about what to do are under threat as well. The proverbial loser is anybody who does not think about the strategic consequences of it,” Norton explains.

“There are three elements to PSD2. There is a funds-check element, a payment-initiation element, and the aggregation element of transactions from multiple providers.

“With SCT Inst there is the opportunity for a retailer to do a funds check at the till and – with the permission of the customer – rather than taking a card payment, access the customer account and take the money there and then, bypassing the card altogether.

“This is great for the retailer because the merchant service charge is removed altogether,” Norton notes.

The jury is out on this one but it is by no means inevitable that cards are going to be killed off any time soon. Chances are the PSD2 deadline will arrive in a pomp of confusion from all parties and nothing much will change – for a while anyway. <

‘Still quite a bit of a problem to solve’Rich Wagner, CEO at APS financial, feels the incoming regulation will help the card industry to flourish and prosper, in particular the prepaid cards market.

“I do not think cards will go away. Prepaids have always been there to solve a problem, and there is still quite a bit of a problem to be solved,” he says.

“We (APS) have moved away from prepaid into current accounts where there is a much more rich customer experience, a more rich value proposition – not just for the customer but also a revenue opportunity for us.

“It is not from increasing the price of the product but the fact that customers started allowing us more share of their wallet, more share of how they transacted. That has allowed us to continue to grow in the last six years.”

Ovum, Icon Solutions: Cards to lose, particularly in e-commerceThe research from Ovum and Icon Solutions, titled Instant Payments in the post-PSD2 Landscape, finds that PSD2 payment initiation, together with Instant Payments, will offer a compelling alternative to payment cards, especially for online transactions.

The combination will push consumers towards instant payments, increasing transaction volumes and reducing the growth rate of cards.

As a result, Instant Payments will overtake cards for e-commerce transactions by 2025 across Europe; in certain countries this crossover point is likely to be reached even sooner than then. This is belived to be the first time that the impact of PSD2 and Instant

Payments on cards has been concretely identified.

The market share of one-time payments using cards will drop markedly from 40% today to just 11% by 2027. In contrast Instant Payments will absorb much of the growth in European e-commerce over the coming decade, reaching 29% of direct, consumer-to-business online expenditure by the end of 2027.

In fact, in some European nations Instant Payments will take such a hold that it will be the dominant form. In the Netherlands, for example, 72% of online payments will be instant. Poland and Germany will see a 42% and 37% market share while the UK will hit 29%. <

instant payments will asborb much

of the growth in european e-commerce

EPI July 361.indd 12 03/08/2017 12:31:32


analysis | sct inst

The vision for SCT Inst is instantaneous payments across a region comprising all 28 EU

nations, plus Iceland, Lichtenstein, Monaco, Norway, San Marino and Switzerland.

Of course, instant payments are already up and running in the UK, Poland, Sweden and Denmark; however when SCT Inst is fully operational it will have extended this facility to a region just short of 5m square kilometres.

PAYMENTS AFFECTEDThe Euro Retail Payments Board defined SCT Inst as: “Electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation).

“This is irrespective of the underlying payment instrument used (credit transfer, direct debit or payment card) and of the underlying arrangements for clearing (whether bilateral interbank clearing or clearing via infrastructures) and settlement (for example, with guarantees or in real time) that make this possible.”

The scheme currently has a limit of €15,000 ($17,546) per transaction. Each SCT Inst, transaction is proposed to take just 10 seconds and the scheme will use the ISO 20022 global messaging standards for real-time payments.

The European Payments Council (EPC) recently reported on the various levels of progress being made. Payment Service

Providers (PSPs) from five countries are expected to be ready for SCT Inst by the 21 November deadline in Austria, Finland, Italy, Latvia and Spain. In all, more than 600 PSPs are expected to propose SCT Inst services before the end of November.

Further behind, but catching up fast, are the countries aiming to join next year, notably Belgium, Germany, Portugal and Sweden, and some PCPs from the Netherlands.

In addition, seven large Clearing and Service Mechanisms (CSMs), including EBA Clearing, Equens Worldline, Iberpay and Stet, are set to support SCT Inst transactions from November, with the EPC declaring that other CSMs will announce compliance with SCT in the coming months.

CHALLENGES, CONCERNSJean-Yves Jacquelin, chair of the EPC Scheme Evolution and Maintenance Working Group recently voiced concerns about SCT Inst. Asked about the main challenges PSPs face in the implementation of the scheme, he highlighted four types:

The first, he said, were technical obstacles, noting: “PSPs who wish to offer SCT Inst services have had only one year to prepare since the scheme was unveiled by the EPC in November 2016 with the publication of its rulebook. This is a very challenging timeline, considering that PSPs need to adapt their IT systems and ensure real-time processing and 24/7/365 availability in order to adhere to SCT Inst. This is not an easy task and it requires time and investments.”

The second challenge Jacquelin identified was what he called the business case: “Even if our society is increasingly mobile and fast, the initial request for this pan-European instant credit transfer scheme came from the Euro Retail Payments Board and not directly from the customers themselves.

“PSPs need to decide to adhere to SCT Inst, based on their vision and business case. Specifically, the scheme currently sets a limit of €15,000 per transaction. Though this parameter is not set in stone and might evolve further after November 2018, it might initially limit the relevance of the scheme for corporate customers.”

On the subject of risk management Jacquelin said: “One of the concerns PSPs often share with us is that SCT Inst transactions would be highly attractive for fraud and money laundering. PSPs have to adapt their systems to prevent these risks, while still respecting the target of ensuring that each SCT Inst transaction takes just 10 seconds. This is quite challenging.”

The final challenge identified was uncertainty around CSMs with Jacquelin stating: “There will be no lack of infrastructure on offer for PSPs willing to propose SCT Inst services. However, PSPs are worried they might have to participate in more than one clearing solution to ensure full reachability. As yet, there is no guarantee of concrete interoperability between the different CSM solutions.”

PROGNOSISAsked when he expected SCT Inst to take off, Jacquelin cited the SEPA regulation requiring any new credit transfer or direct debit scheme to reach a majority of PSPs within a majority of member states after three years. “I think SCT Inst will easily reach that target; I suggest a more challenging goal,” he said.

“I imagine a kind of 5/50 rule: Five years after implementation, 50% of the SEPA credit transfer transactions should be processed under the SCT Inst scheme. In other words, by the end of 2022, 50% of all SEPA credit transfers would be instant. This would be a real success story.

“It’s not impossible; it will depend on how PSPs are positioning the instant payments ‘products’ and the channels at the disposal of customers for making instant payments, which must be mobile, easy and fast.

The next challenge I see is a real opportunity for co-operation between fintechs and PSPs to make SCT Inst a success story.”<

european payments: scT inst zone takeS shapeThe deadline for the Single Euro Payments Area Instant Credit Scheme (SCT Inst) is fast approaching, and the countries involved are at various levels of readiness. Charles Wheeldon writes

EPI July 361.indd 13 03/08/2017 12:31:32


payments fintracker | worldpay

payments fintrackER

Using five common criteria, the GlobalData FinTrack reports give critical at-a-glance information on the latest developments in the fast-moving world of financial technology

Worldpay to offer app-only mPOS for small retailers

Worldpay has launched an extended trial of a software-only card payment mobile POS (mPOS) system. My Business Mobile is designed to turn any smartphone into a card terminal. Aimed at small merchants, the app will accept contactless card payments, as well as Apple Pay and Android Pay, without the hardware required by other mPOS solutions.

Is it original?

Worldpay’s innovation team has developed a unique app that can be downloaded by merchants to enable acceptance of contactless card and mobile transactions without having to buy a dongle. Although mPOS services are by no means new, other options in the market require the use of dedicated hardware, which makes My Business Mobile original.

✓

Is it long-lasting?

My Business Mobile is free and can be downloaded free of charge onto a smartphone. The app aims to enable small businesses such as coffee carts and market traders to accept contactless payments up to £30 ($39.15) using a smartphone. Worldpay is a well-known payments provider, and its strong brand will add value and credibility to the app.

✓

Is it operationally game-changing for the provider?

This concept will undoubtedly attract new customers for Worldpay, including businesses that do not have the capacity to invest in POS terminals. The UK is home to a significant number of small businesses, which suggests that Worldpay could benefit from a high volume of transactions and increased revenue.

✓

Will it significantly improve the user experience?

The app will increase sales by enabling merchants to accept non-cash payments. The monetary saving for merchants is also significant compared with hardware-based alternatives. ✓

Is it market-changing?

The app does not require the purchase of a payment terminal and is free of charge, which gives Worldpay a strong edge among mPOS providers. The service is limited to contactless acceptance, but in the UK a quarter of all card transactions were contactless in 2016, giving this service real long-term potential.

✓

Total Score: 5/5

EPI July 361.indd 14 03/08/2017 12:31:37


payments fintracker | apple

Apple launches P2P payments service

Apple’s P2P payments service will enable users to transfer money through iMessages, or tell Siri to pay people using credit and debit cards stored in the Apple Pay wallet. Transactions will be securely authenticated through Touch ID, and recipients will receive payments in Apple Pay Cash, a new prepaid account linked to Apple Pay. Funds can be used for Apple Pay purchases, or transferred to a bank account.

Is it original?The ability to support P2P payments through messaging apps is not a new concept in the US; PayPal-owned Venmo and Facebook both offer similar services. ✗

Is it long-lasting?

In 2016 there were 45m Apple Pay users in the US, and this number is forecast to reach 86m by the end of 2017 according to Juniper. Additionally, Apple Pay will be available at half of all US retailers by the end of 2017, providing strong retailer integration for its mobile payment service. Apple’s P2P payments service thus has long-term potential due to Apple Pay’s popularity and the size of its target market.

✓


This launch opens up a new and potentially lucrative area of business for Apple Pay, as the US P2P payments market is expected to reach $200m in value by 2020. Apple is challenging the current market leader, Venmo, although its service offers no unique functionality compared to its competitors.

✓


Secure authentication of transactions will be made through Touch ID, and recipients will receive transferred funds in Apple Pay Cash. Similar to Venmo, Apple’s P2P payments service requires consumers to manage a prepaid account as well as card or bank accounts, meaning Apple cannot claim to provide a better user experience.

✗


Apple P2P payments will create a stronger competitive environment in the US P2P payments environment, rather than disrupt the market. The move reflects the industry trend towards incorporating P2P payments as a supplementary feature for messaging apps.

✗

Total Score: 2/5

£ $ € ¥

EPI July 361.indd 15 03/08/2017 12:31:37


payments fintracker | pi pay

Pi Pay mobile payment platform to launch in CambodiaIn Cambodia around 75% of the population are under the age of 40, and the country is rapidly embracing smartphone and internet connectivity. Soon-to-be-launched mobile payment service Pi Pay is set capitalize on this and drive the market’s mobile payment ecosystem. In addition to money transfers, Pi Pay will also utilize QR codes for offline payments, as well as integrating text messaging and video chat features into the platform.

Is it original?

Combined P2P and mobile proximity payment solutions such as Pi Pay are not new, and there are already many other providers such as Apple in the West and WeChat Pay in China, which has over 900m users. However, given Cambodia’s financially underserved population and current stage of economic development, Pi Pay is highly original for the market.

✗

Is it long-lasting?

According to GlobalData’s Macroeconomic Indicators database, 75% of Cambodians are aged under 40. With a huge financially underserved population and lack of a developed payment infrastructure, Pi Pay’s QR code-based payment mechanism will set the standard for digital payments in Cambodia for the next generation. China’s Alipay has seen great success with QR codes in a similarly underserved market, proving that the model works.

✓


As a subsidiary of Anco Group in Cambodia, Pi Pay’s affiliates include ABA Bank, CIMB Bank and PayGo, a local online payment provider. In terms of financing it has strong backing from its parent company, as well as relevant affiliates in banking and online payments with which it can work. These affiliates and backers stand to see new revenue streams open up as they enter into the mobile payments market.

✓


With a large portion of the market being financially underserved while having access to smartphones and data connections, the Pi Pay platform is set to bring banking and payment convenience to consumers, enabling them to make in-store and remote electronic payments that would otherwise take another generation to become a market reality.

✓


Using digital payment technology such as QR codes, which are cheap for merchants to accept as they do not require investment in terminals, Pi Pay can swiftly alleviate the low-financed and poor payment infrastructure situation in Cambodia. In this respect it is likely to bring a dramatic improvement to the market.

✓

Total Score: 4/5

EPI July 361.indd 16 03/08/2017 12:31:38


industry insight | apple

During its Worldwide Developer Conference 2017 keynote address, Apple announced it is launching a

P2P payments service.The feature will arrive on iOS 11 later in

2017, and will enable users to transfer money through iMessages, and tell Siri to pay other people using credit and debit cards they have stored in the Apple Pay wallet.

Transactions will be securely authenticated through Touch ID, and recipients will receive the transferred funds in Apple Pay Cash. This is a new prepaid account that lets consumers take the money they receive via the P2P service and use it to transfer funds to their bank account, or make Apple Pay purchases online and in physical stores.

SIGNIFICANT EXPANSIONThe US P2P payments space has witnessed significant expansion, and is estimated to exceed $200bn in value by 2020 according to Let’s Talk Payments research. It is therefore unsurprising that Apple wants a share. However, one competitor is looming large over the market.

Venmo – owned by PayPal – had first-mover advantage, which allowed it to become the dominant P2P payment service, especially among younger demographics.

Sixty percent of US consumers that have chosen Venmo are aged 25–34; 20% are 18–24, and 20% are 35–44, according to GlobalData’s P2P Payments Analytics 2016.

Apple may struggle to overcome Venmo, in

terms of appealing to younger consumers who do not have a bank account.

Furthermore, Apple’s P2P payments service will only be available to iOS devices, whereas Venmo enjoys the benefit of a cross-platform service that is also available on Android devices.

Both services require consumers to manage a prepaid account as well as their card or bank accounts, meaning Apple cannot claim to provide a simpler service than Venmo.

COMPETITIVE ADVANTAGESInstead, Apple’s competitive advantages will most likely stem from Apple Pay’s popularity. In 2016 there were 45m Apple Pay users in the US, and this number is forecast to reach 86m by the end of 2017 according to Juniper.

Additionally, Apple Pay will be available at half of all US retailers by the end of 2017, providing strong retailer integration for its mobile payment service.

Apple’s P2P service is a late response to Venmo’s successful offering, and does not offer anything beyond Venmo’s capabilities.

However, Apple may still be able to challenge Venmo’s dominance by taking advantage of its pre-existing customer base to promote a secure and integrated P2P payments service. <

industry insight: apple to challenge venmo in the mobile p2p payments arenaWhile Apple is determined to grab some P2P market share, it faces strong competition from the dominant player in the US, Venmo. Apple’s best bet is to leverage its huge customer base to promote a secure and integrated P2P payments service, but is that enough? GlobalData Financial Services analyses

Apple’s P2P service is a late response to Venmo’s successful offering, and does not offer anything beyond Venmo’s capabilities.However, Apple may still be able to challenge Venmo’s dominance

EPI July 361.indd 17 03/08/2017 12:31:38


country snapshot: slovakia

country snapshot | slovakia

CARD TRANSACTION VALUES BY CHANNEL ($ BILLION)

ATM POS

2012 3,978.7 625.0

2013 4,684.8 959.5

2014 4,824.2 990.6

2015 5,310.7 1,164.5

2016 (estimate) 448.0 282.1

2017 473.3 296.4

2018 493.4 310.9

2019 510.6 327.9

2020 526.0 347.2

2021 533.3 364.6Source: ECB, GlobalData

CARD TRANSACTION VOLUMES BY CHANNEL (MILLION)

ATM POS

2012 89.4 40.3

2013 89.4 41.9

2014 90.1 45.7

2015 96.5 53.4

2016 (estimate) 100.2 58.6

2017 103.7 63.6

2018 106.9 68.8

2019 110.0 74.0

2020 112.9 78.7


NUMBER OF ATMS AND POS TERMINALS (THOUSAND)

ATM POS

2012 2.5 40.3

2013 2.6 41.9

2014 2.7 45.7

2015 2.7 53.4

2016 (estimate) 2.8 58.6

2017 2.8 63.6

2018 2.8 68.8

2019 2.9 74.0

2020 2.9 78.7


Cash remains the predominant payment instrument in Slovakia, mainly for day-to-day and low-value transactions. GlobalData finds contactless payments are gaining acceptance

SLOVAKIA

Overall, cash accounted for 67% of Slovakia’s total payment transaction volume in 2016.

Government financial inclusion initiatives however, coupled with improvements to infrastructure by commercial banks, led to a gradual rise in electronic payments.

To encourage cashless payments, the government imposed restrictions on cash payments in 2013, at $19,916.1 for individuals and $6,638.7 for entrepreneurs.

The average transaction value on all payment cards fell from $86.1 in 2012 to $70.9 in 2016. The consistent decline is likely to reflect the continuing migration of low-value cash payments to payment cards.

A gradual consumer shift to card-based payments, the rising acceptance of payment cards by retailers and the advent of contactless technology are expected to increase the share of payment cards over the 2017–2021 period.

Slovak consumers tend to prefer debit cards to make card payments. Debit cards accounted for 83% of all payment cards in circulation in 2016.

Debit card penetration in Slovakia was 86.4 cards per 100 individuals in 2016, higher than Hungary (77.7), Poland (77.7) and Romania (66.8).

The rising banked population led to increased debit card penetration. Debit cards are offered as a complimentary product with bank accounts. Tatra Banka, for example, provides a student account to individuals between the ages of 15 and 26, while VUB Bank provides a senior account for pensioners. Likewise, Slovenska offers the giro senior account for individuals receiving disability benefits or an orphan’s or widow’s pension.

Slovakia has recorded strong uptake in contactless technology. The number of

contactless transactions rose by 99.4% from 50.5m in 2014 to 101m in 2015. In terms of transaction value, contactless payments increased by 105.8% from $728.6m to $1.5bn. VUB Bank, Slovenska, Tatra Banka, UniCredit Bank and CSOB all offer contactless cards.

Retailers are installing contactless POS terminals to benefit from this trend. According to the central bank, the number of contactless POS terminals rose by 44% from 26,680 in 2014 to 38,424 in 2015.

A growing preference for contactless payments, growth in the young population, and increasing smartphone penetration saw banks, payment service providers and telecom companies launching near-field communication (NFC) solutions to gain market share.

VUB Bank and Tatra Banka introduced NFC-equipped mobile payment apps, MobilePay app and Wave2Pay in 2016 and 2014 respectively. In 2013, Slovakian mobile carrier Slovak Telekom introduced an NFC wallet that allowed users to make contactless payments. <

PAYMENT CARDS BY TYPE (MILLION)

Debit Pay later

2012 3,978.7 625.0

2016 (estimate) 4,684.8 959.5

2017 4,824.2 990.6

2021 5,310.7 1,164.5Source: GlobalData

EPI July 361.indd 18 03/08/2017 12:31:45


country snapshot | romania

Although cards occupied a small share of the Romanian cards and payments industry, they registered

the highest review-period (2012–2016) transaction volume and value growth rates of 20.65% and 17.24% respectively.

This was a result of a greater number of POS terminals in service, an increase in the number of retailers accepting payment cards, a decline in interchange fees, and a growing consumer preference for contactless payments. Government initiatives such as a cap on cash transactions are expected to further encourage electronic payments in Romania.

Debit cards accounted for 92.9% of the total payment cards transaction value in 2016. The majority of banks in Romania offer overdraft facilities as high as six times the account holder’s monthly salary, reducing the need for other credit facilities.

Banks are successfully encouraging customers to use debit cards for POS purchases rather than cash withdrawals by offering reward points, discounts at partner retailers, and cashback.

Consequently, debit card transaction volumes at POS overtook ATM transactions for the first time in 2015. Banks are also offering contactless debit cards to increase convenience; as of December 2015, Banca Transilvania had issued 300,000 contactless Visa Electron BT Cards.

Pay later card penetration was 13.5 cards per 100 individuals in 2016, on par with Bulgaria (13.5) but lower than Croatia (40.8), the Czech Republic (23.2), Slovakia (17.7), Poland (16.0) and Hungary (15.4). Slovenia had the highest rate at 53.2.

Despite attractive overdraft facilities, Romanians are gradually using credit cards to benefit from interest-free credit periods – a facility not available on overdrafts, as

banks calculate interest from the day the overdraft facility is used.

New EU regulations capping credit card interchange fees came into effect in December 2015, and are expected to encourage merchants to accept card payments. Also, the Romanian government introduced a cap on cash transactions of $1,248.2 per day for individuals and $2,496.5 per day for companies per single transaction in March 2015. These initiatives are expected to provide a much-needed boost to the credit cards market.

Contactless has been a driver of payment cards growth. The volume of payment cards in circulation posted a review-period CAGR of 147.46%, rising from 120,000 in 2012 to 4.5m in 2016. According to Mastercard, the number of contactless transactions processed grew by in 2015.

From 1 May to 31 December 2015, the issuer ran a campaign in partnership with the National Association for Consumer Protection and the Promoting Programs and Strategies in Romania to promote contactless payments. <

country snapshot: romania


ATM POS

2012 31.3 7.0

2013 35.1 8.3

2014 37.5 9.6

2015 33.5 9.7

2016 (estimate) 35.9 11.5

2017 38.4 13.3

2018 41.1 15.2

2019 44.0 17.1

2020 46.9 19.0

2021 49.3 20.7Source: Central Bank of Romania, GlobalData


ATM POS

2012 227.0 158.1

2013 229.7 187.7

2014 234.0 223.7

2015 232.6 276.7

2016 (estimate) 241.0 335.0

2017 249.5 394.9

2018 257.7 455.7

2019 265.6 516.3

2020 273.0 574.5



ATM POS

2012 11.0 126.3

2013 10.8 128.0

2014 11.0 135.5

2015 11.5 144.4

2016 (estimate) 11.8 155.4

2017 12.2 166.8

2018 12.5 177.9

2019 12.7 188.5

2020 13.0 198.3



Debit Pay later

2012 11.4 2.3

2016 (estimate) 13.1 2.6

2017 13.9 2.8

2021 16.8 3.4Source: GlobalData

Cash accounted for 89.3% of total transaction volume in 2016; attractive overdrafts hamper uptake of pay later cards. Are card issuers overcoming these obstacles? GlobalData analyses

ROMANIA

EPI July 361.indd 19 03/08/2017 12:31:54


Country snapshot | china

China’s average annual spend per card is high, at $1,388.7, as compared to peers such as Malaysia ($695.2),

Thailand ($492.8), the Philippines ($351.7), Indonesia ($283.5) and Cambodia ($112.6).

Cash, however, remains a popular payment instrument among Chinese consumers, especially in rural areas. This is primarily a result of limited knowledge of the benefits of electronic payments, and limited access to banking infrastructure.

The government and banks have begun to provide basic financial access to the unbanked population by expanding banking infrastructure, launching new branches and making efforts to change consumer payment habits.

As a result, payment cards are gradually becoming more accepted, with their use growing during 2012–2016. The share of the Chinese population aged 15 or above with a bank account rose from 69.3% in 2012 to 84.6% in 2016.

A rise in the economically active population and per capita disposable income, the growing popularity of online shopping, the increased acceptance of

cards at retailers and the adoption of contactless technology supported growth in payment cards, and the emergence of digital-only banks is likely to accelerate a shift towards electronic payments.

WeBank launched in January 2015 to become China’s first digital-only bank, allowing consumers to conduct transactions entirely online and via mobile phones. It was followed by the launches of MYBank and Baixin Bank in June and November 2015 respectively.

China UnionPay (CUP) is the sole scheme provider of payment cards. According to central bank regulations, all banks and card issuers operating in the country are required to route renminbi-based transactions through CUP’s electronic payment network.

However, following a complaint by the US via the World Trade Organization about discrimination against foreign companies in 2012, the WTO directed the Chinese government to open up its payment cards market to foreign operators.

In October 2014, the Chinese government announced its decision to allow foreign companies to set up their own payment card clearing businesses, with effect from 1 June 2015. In June 2016, however, the central bank set new rules enabling foreign competitors to begin operations in the market.

This move by the Chinese government is anticipated to intensify competition in the payment cards market, and reduce CUP’s dominance. However, Visa and Mastercard have far to go before they can gain substantial market share from CUP, as they need to build infrastructure from scratch.

Contactless mobile payments and consumer preference for secure and convenient payment services are growing with the launches of Apple Pay, Samsung Pay, Huawei Pay and Mi Pay in 2016, in association with CUP. <

country snapshot: china


ATM POS

2012 2,198.0 2,998.8

2013 2,787.0 4,583.6

2014 3,142.9 6,103.1

2015 3,456.8 7,919.8

2016 (estimated) 3,791.9 8,582.1

2017 4,128.1 9,481.9

2018 4,457.0 10,467.8

2019 4,775.0 11,521.3

2020 5,071.9 12,641.3Source: BIS, GlobalData


ATM POS

2012 11,452.6 9,009.1

2013 12,874.5 12,971.0

2014 13,715.1 19,754.4

2015 14,568.4 29,029.9

2016 (estimated) 15,431.7 36,900.0

2017 16,277.7 45,818.9

2018 17,113.3 55,491.5

2019 17,883.5 65,236.4



ATM POS

2012 415.6 7,117.8

2013 520.0 10,632.1

2014 614.9 15,935.2

2015 866.7 22,821.0

2016 (estimated) 920.0 27,100.0

2017 971.8 31,900.5

2018 1,019.8 36,862.8

2019 1,062.7 41,716.4



Debit Pay later

2012 3,203.1 331.1

2016 (estimated) 5,670.0 510.0

2020 8,341.9 703.5 Source: GlobalData

China is Asia’s largest payment cards market in terms of card transaction value and volume, accounting for 77.1% and 45.8% shares respectively in 2016. GlobalData looks at the regional giant

CHINA

EPI July 361.indd 20 03/08/2017 12:31:59


industry insight | Global Payments Innovation Jury

Innovation in payments is steadily increasing. Across the globe, there is a higher level of focus on innovation,

driven by a combination of startups entering the market and established businesses digitising as fast as possible.

Yet, despite this collective push, the pace and the direction of payments innovation varies significantly from region to region.

One region that is consistently seen as leading the way is Asia. Driven by rapid population growth, high willingness to accept new technology and its sheer size, Asia is leading a wave of disruption that is fundamentally changing the global payments landscape.

Asia’s dominance as the home of payments innovation was reflected in this year’s Global Payments Innovation Jury report.

Published every two years and comprising the views of 70 successful payments executives from 37 countries, the report considers many aspects of the worldwide industry and gives its considered view on how innovation is occurring and bringing about change.

By a very substantial margin, the jury rates Asia as home to most payments innovation over the next two years, a position that it has held since the inaugural 2008 jury.

However, the 2017 jury sees Asia’s innovation leadership position as being stronger and more entrenched than previous juries.

WHY IS ASIA THRIVING?The fintech boom in Asia is well documented, and continues to go from strength to strength.

China is clearly intent on being the global fintech leader; India is acting as the other regional powerhouse, with an aggressive payments modernisation and innovation agenda driven by the National Payments Corporation of India.

It is important to emphasise here that payments innovation in Asia goes beyond the ‘China effect’. Many other countries in the Asia region are modernising their payments infrastructures and creating environments that support innovation.

For example, smaller markets such as Hong Kong, Malaysia and Singapore are rapidly modernising their payments infrastructures, and are also aiming to be significant players in fintech – with Singapore in particular showing the way.

The opportunities in the region are widespread due to rapid population growth, high willingness to accept new technology and the sheer size of the market opportunity to convert from cash to digital payments in economies where the reach of traditional banks is limited.

The value of mobile payments in China alone in 2016 was estimated at $5.5trn, 50 times more than the value of mobile payments made in the US.

Asia is leading a wave of disruption that is fundamentally changing the global payments landscape

industry insight: a closer look at Asia’s role in global payments innovation

The rate of development in the payment industry has rarely – if ever – been faster, and no region has its foot as hard on the accelerator as Asia. John Chaplin, chair of the Global Payments Innovation Jury, analyses the results of its latest research into innovation and change in the sector

EPI July 361.indd 21 03/08/2017 12:32:02


PREFERENCE FOR B2CAlthough B2B is seen as offering the best profit potential globally, jurors in Asia believe that consumer payments provide the biggest opportunities in their markets.

Consumer payments are seen as the major opportunity in this region, as there is still so much potential to put financial services and payments instruments into the hands of unbanked consumers for the first time, facilitated by increasing mobile phone and broadband penetration.

Indeed, innovators in Asian markets may find the path to B2C profitability smoother than in more developed markets because they are not trying to build on top of or work around ageing legacy systems.

Paytm in India has built its own ecosystem and has therefore been able to move quickly in a market that often does not move very fast.

HOME TO FUTURE GROWTHThe abundance of opportunities available in Asia is having a clear positive impact on where jurors would prefer to establish their next payments venture.

Almost half (47%) state that – irrespective of where they are currently based – Asia would be their preferred location if they were starting a payments business today.

With success stories from bKash in Bangladesh, Alipay in China and Paytm

in India, and the commitment of central banks to the modernisation of payments infrastructures, Asia is unsurprisingly seen as the most attractive market.

The jury ratings and comments suggest that much of the effort in the fintech hubs in Europe and the US is being directed towards opportunities in markets like Asia and Africa. Entrepreneurs in Europe and the US are very active in payments innovation, but it

seems they are not so convinced that the best business opportunities lie within their own geographies.

Although there is stiff competition to be crowned the hub of most payments innovation, there is no doubt that Asia is

still king. While the western world has been burdened by mature banking and payment systems, Asia has, and still is, leading a new wave of payments innovation.

Free from the burden of legacy banking systems and motivated by increasing customer demand, a favourable view of technology, and population size, payments innovation in this region has become almost unstoppable, and in that regard, one to watch. <

industry insight | Global Payments Innovation Jury

Consumer payments are seen as the major opportunity in this region, as there is still so much potential to put financial services and payments instruments into the hands of unbanked consumers for the first time

“

EPI July 361.indd 22 03/08/2017 12:32:06

SHAPE THE FUTURE OF PRIVATE BANKING

For more details please contact Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580.

Private Banking Switzerland 201712th December 2017 � The Marriott, Zurich

Private Banking Switzerland 2017 brings together private banks, family o� ces, independent wealth managers and intermediaries in an active discussion to debate the importance of new

strategies, business practices and partnerships of the key issues facing the industry.

� Hear � Network � Discover � Celebrate

Key Issues

� Recognising regulatory changes and trends in private banking this year

� Identifying the needs and preferences of today’s clients

� Next generation banking and how it is evolving

� How is digital shaking up the wealth management industry?

� Family O� ces: How can they continue to succeed in today’s market?

� The importance of conduct risk at London’s private banks

� Brexit: how will this shape the future of private banking in Switzerland and Europe

Gold Sponsor Silver Sponsors Brand Sponsors Exhibitors Panel Host

Private Banking Swiss_2017_ad.indd 2 13/06/2017 11:38Untitled-3 1 03/08/2017 13:17

Or

Intelligent Environments,

the international provider

of digital fi nancial services

solutions in association with

Retail Banker International,

Cards International, Electronic

Payments International, Private

Banker International, and

Motor Finance publications

Join thousands of fi nancial services professionals who have joined The Digital Banking Club to understand the future of mobile and online fi nancial services

Membership benefi ts

Annual subscriptions to Retail Banker International, Cards International, Electronic Payments International

Delegate places for the Retail Banker International event being held on the 11th May in London

World Market Intelligence’s archive of over 250 Retail Banking and Cards & Payments research reports

Subscription to the Retail Banking and Cards International Intelligence Centres

10% discount for new subscribers/purchasers on:

Join The Club!www.thedigitalbankingclub.com

@TheDBclub

Membership is free

For more information please email:[email protected]

TDBC Adverts - 2017.indd 1TDBC Adverts - 2017.indd 1 03/01/2017 08:17:5303/01/2017 08:17:53

Documents

OUT OF ACES...Swatch launches . NCF-enabled watch. Swiss watch giant Swatch Group has launched . the second generation of its chip-embedded watches for mobile payments in China. The